Speakers: Trump’s first year could be an economic roller coaster

In this Dec. 15, 2016, file photo, President-elect Donald Trump speaks during a rally in Hershey. The impact of Trump’s victory on the economy was the main topic in this year’s Annual Economic Outlook program put on Friday by the Chester County Economic Development Council.
AP File Photo - Evan Vucci

Dave Hanson of Fulton Financial Advisors speaks Friday at the Chester County Economic Development Council offices in Uwchlan.

UWCHLAN >> Businesses and investors should expect chaos this year as Donald Trump takes over the presidency.

But chaos isn’t necessarily a bad thing, argued Dave Hanson of Fulton Financial Advisors as he and Certified Financial Planner Patti Brennan gave their Annual Economic Outlook Friday at the offices of the Chester County Economic Development Council.

“In October, I said there’s no way Donald Trump was going to win,” Hanson told the 135 attendees at the event, saying he had plenty of data to back up his prediction. In the end, he said, “emotion ‘trumps’ models.”

Brennan cautioned the business crowd against “Trumpforia,” noting the last time investors were euphoric about a presidential candidate winning was Ronald Reagan in 1980. Markets initially jumped then as they have since Trump’s election, she said. But a year after Reagan took office, the S&P 500 index dropped 28 percent when interest rates were raised.

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“So let’s all keep a level head as we head into 2017,” Brennan urged.

Beyond the danger of over-expectations, there is a whole series of questions of what Trump’s policies actually are and how they will affect the economy, Hanson said, noting that the candidate was often scarce with specifics.

Economists in general believe many of Trump’s campaign promises are either unrealistic or harmful to the debt and deficit situations, Hanson said.

The promised tax cuts if approved will help the economy grow but will probably add to the national deficit, he said, and the deportation of illegal immigrants would exacerbate an already tight labor market if enforced.

It all points to a plan that doesn’t add up in fiscal terms, much like Trump’s candidacy didn’t appear to have a political chance. And like his candidacy, there’s a wild card that could save the Republican’s economic plan, Hanson said.

In a survey that asked how optimistic they were about the economy, small business owners registered a minus-6 percent before the election compared to plus-38 percent a month after the election, said Hanson, noting that small business employs 52 percent of Americans.

The biggest reason they’re happy Trump won the election? Their belief he will fulfill his campaign pledge to rid them of burdensome government regulations.

“It’s the wild card,” Hanson said of small business.

Brennan, meanwhile, said Trump’s tax plan for individuals follows Arthur Laffer and his “Laffer Curve” that states the less you tax something the more you’ll get from it due to the stimulative effects of lower tax rates.

She said Trump’s plan proposed reducing the number of tax brackets from seven to three but would take away personal exemptions. The overall effect would be to lower tax rates for many individuals and families and would be “very stimulative” for those operating C or S corporations.

Brennan also cautioned investors to tune out to the “Dow 20-thou” chatter.

“You’re going to hear more hype than ever,” Brennan said. “(But) it’s only a number.”

While upbeat about the markets, Brennan cautioned investors not to expect a straight-line rise in them.

“It’s going to be volatile, messy and ugly,” she predicted, urging investors to adopt her 10,10 and 10 rule. “Think about the impact that the decision you’re making will have in the next 10 minutes, the next 10 months and the next 10 years.”

To contact Business Editor Brian McCullough, call 610-235-2655 or send an email to bmccullough@dailylocal.com.